Opinion
CIVIL NO. 1:99cv347
August 13, 2001
ORDER
This matter is before the court on a motion to reconsider filed by the defendant, SuperValu Holdings, Inc. ("SuperValu"), on April 27, 2001. The court held a telephone conference on the motion on May 24, 2001, and instructed the parties to brief their positions on the issues raised by the motion to reconsider. On June 25, 2001, SuperValu filed its brief in support of motion to reconsider, and on July 24, 2001, the plaintiffs filed a response. Also, on July 23, 2001, the EEOC filed a response to SuperValu's motion to reconsider. For the reasons which follow, the motion to reconsider will be granted, but the request to modify the court's order granting summary judgment will be denied.
The EEOC is the plaintiff in a related case, EEOC v. SuperValu Holdings, Inc., 1 :Olcvl 17. As the issues under consideration impact the EEOC's case against SuperValu, the court invited the EEOC to submit its own brief on the issues.
On August 7, 2001, SuperValu filed a "Renewed Request for Oral Argument". After reviewing the briefs, the court has determined that oral argument is not necessary in this case.
Discussion
On December 22, 2000, this court entered an order granting in part and denying in part SuperValu's motion for summary judgment, and granting the plaintiffs' motion for summary judgment with respect to several of SuperValu's affirmative defenses. After obtaining a change in counsel, SuperValu requested that new counsel be permitted to brief the issues raised by the plaintiffs' motion for summary judgment. The court has permitted such briefing, and will discuss the issues raised by SuperValu.
The pertinent factual background, as set out in the court's December 22, 2000 order, is as follows. SuperValu is in the business of the wholesale warehousing and distribution of both perishable and non-perishable grocery products. Prior to 1984, SuperValu had one main warehouse, Schedule A. Included within Schedule A were non-grocery items referred to as general merchandise. During negotiations for the 1980 contract, SuperValu told the Union that the general merchandise part of its business was not competitive and that significant changes would have to be made to retain that business. SuperValu proposed performing general merchandise work with lower cost, part-time employees. The Union, however, opposed the proposition of performing general merchandise work within Schedule A exclusively with lower paid part-time employees. Ultimately, the parties agreed to create a separate general merchandise facility, Schedule D. The parties further agreed to staff the new Schedule D with 31 employees from Schedule A who would continue to be paid their former Schedule A wage rate. The Union refused to permit any current employees to take a cut in pay if they agreed to move to the new facility. The 31 employees who moved to Schedule D, but kept their regular pay, were all male. Under the contract, SuperValu was permitted to hire an equal number of Schedule D part-time employees at a wage rate that was 70% of the Schedule A rate.
Schedule D closed in July of 1999. A contractual dispute arose over whether employees working in Schedule had a right to "bump" into Schedule A, with their full bargaining unit seniority when Schedule D closed. Prior to 1980 it was clear that employees did not have the right to bump into another Schedule in the event of a layoff. In response to a Union proposal, a new layoff article was added to the 1980 contract, Section 22:07. This Section continued the practice of applying seniority by Schedule, but provided that an employee who bumped to a new division to avoid layoff "shall become the least senior employee in that division." However, not all employees had the right to bump to avoid layoff. Rather, Section 22:07 provided that no employee hired after August 10, 1980 (the date of the contract) could bump to another Schedule to avoid a layoff; those employees would continue to be laid off and recalled solely by Schedule seniority. However, this restriction was removed in the 1992 contract negotiations. Under the 1992 Agreement, Section 22:07 provided that all employees would be laid off and recalled according to Schedule seniority, but that employees could also bump to another Schedule to avoid layoff, with the bumping employee going to the bottom of the seniority list of the new Schedule.
From the start, it was unknown whether Schedule D would be a viable unit. Therefore, the employees were rather apprehensive over the fact that once they became Schedule D employees, they would lose seniority if they had to bump back into Schedule A in the event Schedule D closed. As a result, SuperValu and the Union created Section D:15, which provides:
In the event the General Merchandise Division is moved from the present facility or eliminated, the employees with employment dates prior to August 10, 1980 will be given the opportunity to "bump" into any other Division where they possess the skills and seniority. Seniority in this case shall mean total bargaining unit seniority.
Under this arrangement, the 31 male employees who moved from Schedule A to Schedule D had the right to go back to Schedule A with their full bargaining unit seniority in the event Schedule D closed. Unlike all other employees, these 31 employees would not go to the bottom of the seniority list if they were to bump into Schedule A if Schedule D closed.
Initially, all Schedule D employees hired after the first 31 full-time employees were part-time employees. The parties later agreed that SuperValu could hire more part-time employees if an equivalent number of full-time Schedule D positions were created. The new full-time Schedule D employees received comparable benefits, but continued to be compensated at the lower wage rate. Most of the new full-time employees in Schedule D were former part-timers, though at least a few employees bid into Schedule D from Schedule A at the reduced wage rate.
The plaintiffs, a group often females, were hired by SuperValu between May 10, 1984 and September 9, 1987. The plaintiffs were hired to fill hourly-paid bargaining unit positions, as part-time order selectors, in Schedule D. The plaintiffs later moved up to full-time order selectors in Schedule D.
The plaintiffs, who had secured full-time positions in Schedule D, believed that SuperValu discriminated against women, as the vast majority of the employees in Schedule D, other than the original 31 employees who moved from Schedule A, were female. All of the employees that were eligible to bump back into Schedule A with full seniority were male. Thus, the plaintiffs initiated several union grievances. After their union grievances were unsuccessful the plaintiffs filed charges of Title VII sex discrimination and violations of the Equal Pay Act with the EEOC in October, 1997. On September 28, 1998, the EEOC issued a determination finding that there was reasonable cause to believe that SuperValu was in violation of Title VII and the Equal Pay Act. The plaintiffs filed the present lawsuit on August 23, 1999.
In June 2000, SuperValu requested summary judgment on the plaintiffs' Equal Pay Act claim, and the plaintiffs requested summary judgment on the issue of whether SuperValu produced evidence of affirmative defenses to the Equal Pay Act. In granting the plaintiffs' motion for summary judgment, the court eliminated SuperValu's opportunity to prove that the plaintiffs' Equal Pay Act claims are barred by the affirmative defenses of a legitimate seniority system and/or other factors other than sex (e.g., legitimate two-tiered wage scale and/or red-circling). At SuperValu's request, the court will now reconsider these limited issues.
SuperValu also requested summary judgment on plaintiffs' Title VII claims, which was granted in part and denied in part. The present order does not discuss the plaintiffs' Title VII claims.
To establish a prima facie case under the Equal Pay Act, the plaintiffs must show: (1) that different wages are paid to the employees of the opposite sex; (2) that the employees do equal work which requires equal skill, effort and responsibility; and (3) that the employees have similar. working conditions. Dey v. Colt Construction and Development Co., 28 F.3d 1446, 1461 (7th Cir. 1994). Once a plaintiff establishes a prima facie case under the Equal Pay Act, the burden of proof shifts to the employer to show that the pay disparity is due to: (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) any other factor other than sex. 29 U.S.C. § 206(d)(l)(i)-(iv); Corning Glass Works v. Brennan, 417 U.S. 188, 196 (1974).
SuperValu has conceded, for purposes of its motion for summary judgment, that the plaintiffs can establish a prima facie case under the Equal Pay Act. However, SuperValu asserts that it has asserted affirmative defenses which establish that a bona fide seniority system and factors other than sex justified the pay disparity the plaintiffs allege violate the Equal Pay Act.
With respect to the former Schedule A employees who kept their full wages upon transferring to Schedule D, SuperValu claims that these employees were "red-circled" and that this status establishes that their higher wages was based on a "factor other than sex.". As this court noted in its earlier order, the Seventh Circuit case SuperValu relies on, Grann v. City of Madison, 738 F.2d 786 (1984), describes "red-circling" as follows:
The practice of red circling is common when remedying discrimination that has kept minority groups in low paying jobs that present no opportunity for advancement. In this situation the employer may — and in many cases must — maintain, or red circle, the victimized employees' salary when they transfer to a lower paying job that provides the training necessary for advancement. (citations omitted). Red circling allows the employee to achieve a position he would already have attained but for the discrimination without being forced to suffer any economic loss. The rationale is that the victim of discrimination should not bear the costs associated with remedying the situation.Id. at 790. Moreover, the regulations use the term."red circle" to describe certain unusually, higher than normal, wage rates which are maintained for reasons unrelated to sex. 29 C.F.R. § 1620.26(a). An example of a bona fide use of a "red circle" rate is one in which a company wishes to transfer a male employee, who can no longer perform his regular job duties because of ill health, to different work which is being performed by a female employee. The employer may continue to pay the male employee at his present salary, even if it is greater than that paid to the female employee, for the work both will be doing. Under such circumstances, maintaining an employee's wage rate, despite a reassignment to a less demanding job, is a valid reason for a pay differential, since the differential is based on a factor other than sex. The regulations explain, however, that if a wage rate differential is being paid to employees previously performing equal work, rates of the higher paid employees may not be "red circled". 29 C.F.R. § 1620.26. Another example of a legitimate "red circle" rate is when an employer transfers an employee from a skilled job to a less demanding position but continues to pay the transferee at the higher pay rate in order to have the employee available again when needed in the former job. H.R. Rep. No. 309, reprinted in 1963 U.S.C.C.A.N at 689.
In the briefing on this issue, SuperValu's former counsel did not vigorously pursue the issue of "red circling", which the court construed as an apparent acceptance of defeat on the issue. (December 22, 2000 Order at 18). SuperValu's present counsel, however, has revisited the issue and strongly contends that the male Schedule D employees were red-circled employees. SuperValu contends that the examples set forth in the EEOC Regulations are not the exclusive parameters of the concept of red-circling. SuperValu argues that the applicability of the redcircling defense must be analyzed in light of the facts and circumstances of the particular case, and that salary retention policies are valid red-circling practices even though they do not fit within the examples set forth in the EEOC regulations.
SuperValu first relies on Timmer v. Michigan Department of Commerce, 104 F.3d 833 (6th Cir. 1997), to support its argument that its male Schedule D employees were red-circled employees. In Timnier a male employee was paid more than a similarly-situated female employee. The employer defended the female employee's Equal Pay Act claim by asserting that the male employee had been paid more as a mistake in his job classification, and that having once classified the employee at the higher wage rate it declined to re-classify him at a lower rate, although all future employees doing the same work were classified at the lower rate. The Sixth Circuit held:
Although defendant argues that the restriction policy falls under the merit system defense, we think its alternative argument — that the policy creates a "red-circle" rate which results in a disparity based on a "factor other than sex" — is the correct one. The Act's regulations specify that a "red-circle rate" can be a valid "factor other than sex." 29 C.F.R. § 1620.26 (1995). Generally defined, the term "red-circle" rate describes certain unusual, higher than normal, wage rates which are maintained for reasons unrelated to sex. Id. The legislative history of the Act indicates that Congress intended to include the practice of "red circling" as a § 206(d)(l)(iv) "factor other than sex" to explain a wage differential. See H.R. REP. No. 309, 88th Cong., 1St Sess. 3 (1963), reprinted in 1963 U.S.C.C.A.N. 687, 689.
Defendant's evidence shows that as soon as the mistake was brought to its attention, it undertook to remedy the situation by restricting Esser's position in accordance with the rules of the Michigan Civil Service Commission. Defendant demonstrated that the restriction policy is sex-neutral and has been applied when the Civil Service has determined that a position has been overallocated. Such a policy avoids demoralizing employees whose classifications have changed through no fault of their own.
Plaintiff argues that defendant's policy does not fall within the examples listed in the regulations. See 29 C.F.R. § 1620.26. However, the regulations merely provide illustrations of legitimately maintained red-circle rates. "Red circling" has yet to be defined in all of its manifestations. "The flexibility of the red circling concept has been preserved in anticipation of the need to reconcile legitimate business interests with the Act's purpose." Gosa v. Bryce Hosp., 780 F.2d 917, 919 (llth Cir. 1986).
This is not a situation where "wage rate differentials have been or are being paid on the basis of sex to employees performing equal work, [and the] rates of the higher paid employees may not be "red circled' in order to comply with the Act." 29 C.F.R. § 1620.26. Such a situation would indeed perpetuate the inequities the Congress intended the Act to cure. Here, however, the record establishes that the wage differential that existed before Esser' s job was restricted was not the product of unlawful, sex-based discrimination. The evidence further shows that the restriction policy was not based on considerations of sex and was not discriminatory in application. 104 F.3d at 844-45.
While Timmer does indicate that red-circling can encompass situations other than those specified in the regulations, Timmer does not support SuperValu's contention that its male Schedule D employees were validly red-circled. Clearly, the employer's policy in Timmer, although not identical to an example in the Regulations, followed the general definition of red-circling. The red-circled rate in Timmer was simply a response to a mistake in the application of the employer's civil service system, similar to the way an employee is given a higher red-circled rate to remedy past discrimination or to accommodate an illness or injury.
In the present case, however, the higher rate was a response to a Union demand that prevented the first Schedule A employees from receiving a lower wage upon transferring to Schedule D. The setting of the lower wage rate for the remainder of the Schedule D employees, nearly all of whom were female, was a deliberate act taken by SuperValu. Unlike in Timmer, the difference in wage rates was not the result of a mistake. Nor, as in the examples set out in the Regulations, was the disparity in wages due to ill health or the necessity of having higher paid employees available when needed in a former job. While SuperValu claims that the disparity in wage rates was a "business necessity", SuperValu has failed to show the existence of a general "business necessity" defense to the Equal Pay Act. Clearly, to permit such a broad defense would drastically undermine the Equal Pay Act, as any employer facing economic difficulties could simply decide to pay its female workers less than its male workers. While it may be a "business necessity" for such an employer to do so, such an act would clearly be in violation of the Equal Pay Act.
Christiana v. Metropolitan Life Ins. Co., 839 F. Supp. 248 (S.D.N.Y. 1993), another case relied on by SuperValu, involved a salary retention plan, rather than red circling. With respect to salary retention plans and the Equal Pay Act, the district court for the Southern District of New York stated the following:
Salary retention policies in general, and the employer asserts that its policy in particular, aim to reward longevity of service, recognize past experience and seniority, and preserve and improve employee morale. The purposes of a salary retention policy do not flow from specific job qualifications but rather company-wide business strategies, and therefore to establish the "factor-other- than-sex" defense, an employer is required to prove only that a "bona fide business-related reason exists for using the gender-neutral factor." Aldrich, 963 F.2d at 526 (emphasis added). [footnote omitted].
Salary retention policies may qualify as valid factors other than sex, absent any showing that the policy was discriminatorily applied or has a discriminatory effect. Covington v. Southern Illinois University, 816 F.2d 317, 322 (7th Cir.), cert. denied, 484 U.S. 848, 108 S.Ct. 146, 98 L.E.d2d 101 (1987). See also, Note, When Prior Pay Isn't Equal Pay: A Proposed Standard for the Identification of "Factors Other Than Sex" Under the Equal Pay Act, 89 Colum. L.Rev. 1085 (1989) (salary retention plan that does not perpetuate discriminatorily-set starting salaries and is implemented systematically in response to a business need is an example of an acceptable, non-sex business related factor other than sex).
A salary retention policy recognizes an employee's length of service. This recognition is apt to improve employee morale since it enables an employer to avoid demoting a valued employee who is transferred to another position and subject that employee to an unmerited pay reduction. Id. at 323; Blocker v. A T T, 666 F. Supp. 209, 214 (M.D. Fla. 1987).
Another legitimate justification for a salary retention policy is that it avoids additional expenses incurred to search for new employees and subsequently train them. Moreover, the employer would conserve investments in training of employees with several years of experience whose previous positions as narrowly defined are no longer available because of changes in business needs. Blocker, 666 F. Supp. at 214 (longevity of service was considered very important and male employee's years of service were reflected in his pay); Corning, 417 U.S. at 204, 94 S.Ct. at 2232 (recognizing that the Equal Pay Act contemplates that a male employee with 20 years' seniority can receive a higher wage than a woman with two years' seniority).
* * *
Interpretive regulations concerning the Equal Pay Act specify that "red-circle rates" are a valid factor other than sex. 29 C.F.R. § 1620.26 (1986). "Red-circle rate" is the term applied to employer transfer of an employee to a lower paying position while continuing to pay the employee the higher salary from the previous position, in order to have the employee available when needed for the former job. 29 C.F.R. § 1620.26 (b)(1986).
Although the regulation refers to temporary reassignment due to illness, the enumerated examples and the concept are nonexclusive and merely illustrate situations in which such factors can be considered. The justification for allowing employers to engage in red-circling is to accommodate legitimate business needs by permitting bona fide wage disparities not based on gender in order to minimize the disruption. This reasoning supports the conclusion that the employer's salary retention policy is a valid factor other than sex. Retaining experienced employees rather than incurring expenses in searching for qualified new employees is a legitimate gender-neutral business objective.839 F. Supp. at 253-54, 255.
SuperValu claims that the Christiana court found that the employer's salary retention policy was a form of red-circling even though it was not one of the red-circling examples set forth in the EEOC red-circling regulations. While the Christiana court did discuss the reasoning behind the concept of red-circling, the court did not, as SuperValu suggests, hold that the salary retention policy was a form of red-circling. In fact, the court specifically held that the salary retention plan qualified as a "seniority" system under 29 U.S.C. § 206 (d)(l). Id. at 255. The court simply reasoned that just as red-circled rates may accommodate legitimate business needs (i.e., temporarily accommodating an injured employer), so did the salary retention policy at issue. Id. Moreover, the Christiana court recognized that the salary retention policy benefitted males at times, but "[t]he same program has led to women receiving higher pay than male employees in similar circumstances in other locations." Id. at 249. This cannot be said of the wages in Schedule D, as no woman received, or could ever receive, the higher rate of pay.
Of all the authorities cited by the parties in this case, the court finds this case most akin to Hodgson v. Goodyear Tire Rubber Co., 358 F. Supp. 198 (N.D. Ohio 1973). In Hodgson, the employer had two classes of checkers, one which lifted heavy weights and was all men, and the other which did not lift heavy weights and was all women. The men were paid more than the women. At some point in time, the jobs were made equal and both men and women did the jobs, but the men who were originally paid more continued to receive a higher rate of pay. The company claimed that this was a valid, red-circled rate of pay.
Under these circumstances, the Hodgson court found that the employer had violated the Equal Pay Act. The court felt that the higher rate of pay for men did not have "even the remotest resemblance" to a valid, red-circled rate of pay. Hodgson, 358 F. Supp. at 200. The Hodgson court specifically stated:
The changes were not at all temporary; the higher paid men employees were not transferred from a different job; none of them were old or ill, and none of them exceeded in length of service with the defendant the service of most of the lower paid women employees.Id. As in Hodgson, this court holds that the SuperValu employees were not validly red-circled. The men who transferred to Schedule D were not old nor ill and the transfers were not temporary. Although the men did transfer from a different Schedule, there is evidence in the record that they performed basically the same job. Nor were the rates of pay based on length of service, as other employees, no matter what their length of service, could not be paid the same rate as the first 31 male employees to work in Schedule D. Thus, for all the reasons set out above, the court reaffirms its holding that SuperValu has not shown that its employees were red-circled.
The next issue the court will consider is whether SuperValu can claim, as an affirmative defense to the plaintiffs' Equal Pay Act claim, that the pay disparity was the result of a bona fide seniority system, as the higher rate of pay was provided only to those individuals who first staffed Schedule D. This court held in its order of December 22, 2000 that there is no doubt that SuperValu' s scheme of paying the first contingent of workers in Schedule D higher wages was not the result of a seniority system. (Order at 20). SuperValu has not presented any new arguments on this point that would lead the court to change its conclusion. As this court noted in its earlier order, the evidence is undisputed that SuperValu paid the first contingent of Schedule D higher wages because the Union would not permit them to be paid lower wages. Additionally, it is undisputed that the later-hired Schedule D workers could never make Schedule A wages, regardless of their length of employment. Thus, this court again concludes that since the Schedule D wages were not determined by seniority, SuperValu cannot rely on the "bona fide seniority system" defense to the Equal Pay Act claim.
SuperValu has now shifted its arguments away from the "seniority system" argument, and towards a "two-tier wage scale" argument. SuperValu acknowledges that it had in place a two-tier wage scale, but argues that it cannot be faulted because "the facial reason for the pay differential is the wage scale negotiated and set forth in the collective bargaining agreement." (Brief in Support of Reconsideration at 12). As a two-tiered wage scale is not one of the enumerated defenses to the Equal Pay Act, SuperValu is apparently attempting to fit the two-tiered wage scale into the catch-all fourth affirmative defense: "a factor other than sex."
SuperValu seemingly believes that if its two-tiered wage scale was a product of collective bargaining, then it has proven that the wage differential was a factor other than sex. However, as this court pointed out in its earlier order, the applicable Regulations specifically provide that collective bargaining agreements are not a defense:
The establishment by collective bargaining or inclusion in a collective bargaining agreement of unequal rates of pay does not constitute a defense available to either an employer or to a labor organization. Any and all provisions in a collective bargaining agreement which provide unequal rates of pay in conflict with the requirements of the EPA are null and void and of no effect.29 C.F.R. § 1620.23. Accordingly, the court rejects SuperValu's arguments that its collectively-bargained two-tiered wage scale is a "factor other than sex."
SuperValu further argues that if the court finds that its two-tier wage scale was negotiated without discriminatory intent and is legitimate, then SuperValu prevails on its defense to the Equal Pay Act claims, even though the wage scale may have had a disparate impact. However, the question of whether a discriminatory effect, or disparate impact, caused by a factor other than sex negates the "factor other than sex" defense only arises after a valid "factor other than sex" defense has been presented. In the present case, SuperValu has not prevailed on its arguments that the pay differential at issue was due to a "factor other than sex". Therefore, the court will not discuss the disparate impact issue.
Conclusion
SuperValu's motion to reconsider is hereby GRANTED. Upon reconsideration, the court reaffirms its order of December 22, 2000, for the reasons set forth above.Enter: August 3, 2001.
William C. Lee, Chief Judge United States District Court